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LONDON BOROUGH OF WALTHAM FOREST

Meeting / Date Cabinet 25 February 2020

Report Title FINANCIAL MONITORING: MONTH 9 (December)

Cabinet Portfolio Councillor Clare Coghill

Leader of the Council

Report Author/ Contact details

Brian Moldon, Strategic Finance Advisor - Corporate

Finance & Governance Directorate

020 8496 4477

brian.moldon@walthamforest.gov.uk

Wards affected None specifically

Public Access OPEN

Appendices 1 - Savings schedule

1. SUMMARY

1.1 This report presents the forecast year-end position in respect of the Council’s revenue expenditure. The Month 9 monitor currently identifies net pressures of £7.501 million, although the current forecast for the overall General Fund outturn is anticipated to be in line with the budget with corporate items having been identified to balance the budget.

1.2 Service pressures identified at Month 9 are:

Strategic Director of Families £7,293,000

Strategic Director of Residents Services £135,000

Strategic Director of Corporate Development £73,000

1.3 As per the Council’s financial ground rules, approved by Cabinet at the beginning of the year, service directors have been instructed to implement management actions to mitigate any pressures outlined in paragraph 1.2 before the use of corporate items are made.

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2. RECOMMENDATIONS

2.1 Cabinet is recommended to:

2.1.1 Agree that Strategic / Executive / Service Directors continue to identify management actions to mitigate any reported pressures and report those mitigations to the Director of Financial Services, which is in line with financial ground rules agreed by Cabinet in Month 2 budget monitoring report.

2.1.2 Note that the anticipated outturn at month 9, will be in line with budget following service mitigation / plans provided (agreed in 2.1.1), and the potential use of corporate resources to maintain a balanced position at year-end.

2.1.3 Agree the two alternative proposals to offset the Learning Disabilities saving (ref. FH28 from Appendix 1) as follows:

Redesign of Local Authority Designated Officer (LADO) and Safeguarding in Education £30,000

Capitalisation of Disabled Facilities expenditure £300,000

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3. REPORT

3.1 For 2019/20, the projected outturn will be in line with budget. The increased pressure in the month will be mitigated as much as possible by directorates through identifying plans to eliminate within the directorates, in line with the financial ground rules.

* The £1.912m increase in Corporate management actions is largely due to mitigating management actions not being found in services and now being mitigated through corporate action. Services are required to keep pursuing all opportunities to mitigate any pressures before year-end. Corporate resources will provide a backstop for the outturn to balance should any residual pressures remain at year-end.

Gross Year End Forecast Month 9

£’000

Use of balances

£’000

Mitigations

£’000

Net Year End

Forecast At Month

9

£’000

Adverse / (Favourable)

change in Net Forecast

£’000

Chief Executive 0 0 0 0 0

Economic Growth - Property & Asset Management

0 0 0 0 (80)

Economic Growth – Regeneration & Growth

0 0 0 0 0

Economic Growth total 0 0 0 0 (80)

Care & Support 4,149 0 (879) 3,270 2,160

Wellbeing & Independence 1,635 0 0 1,635 75

Communities 1,838 0 0 1,838 (193)

Strategic Director 300 0 0 300 300

Education Services 250 0 0 250 0

Families total 8,172 0 (879) 7,293 2,342

Resident Services (including Housing)

135 0 0 135 (159)

Corporate Development 73 0 0 73 (191)

Finance & Governance 0 0 0 0 0

Sub-total 8,380 0 (879) 7,501 1,912

Corporate (3,300) 0 (4,201) (7,501) (1,912)

TOTAL 5,080 (5,080) 0 0

HRA 0 0 0 0 (90)

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Redefining Waltham Forest Savings Programme

3.2 The total value of savings currently programmed for delivery for 2019/20 to 2020/21 is £8.682 million with £6.248 million for delivery in 2019/20 and the balance of £2.434 million in 2020/21.

3.3 For 2019/20, the value of delivered proposals (i.e. closed with no further action required to achieve the saving) has increased by £152,000 to £3.152 million or 50.4% of the total requirement. The value of proposals RAG rated “Green” has reduced by £19,000 to £1.312 million and RAG rated “Amber” has reduced by £159,000 to £733,000. The level of proposals RAG rated “RED” has increased by £26,000 to £1.051 million or 17% of the total requirement.

3.4 The table above includes the savings reprofiled for delivery of £2.434 million for Families and this was reported to the June 2019 Cabinet as part of the update on the Families Financial Sustainability plan. This reprofiled savings is contributing to the Families overspend in 2019/20 and will be one-off only, to ensure the Council can maintain an ongoing balanced budgetary position.

3.5 The level of savings RAG rated “RED” reflects the level of risk in delivering the Families savings proposals and this is consistent with the position reported within this budget monitor. As reported in previous months, an action plan is being developed to address these pressures and an update of the Families Sustainability Plan will be presented to May Cabinet. This month’s savings list includes two alternative proposals recommended for approval, which will partly offset the Learning Disabilities saving (ref. FH28). The alternative savings are as follows:

Redesign of LADO and Safeguarding in Education £30,000

Capitalisation of Equipment £300,000

ECONOMIC GROWTH – Stewart Murray

Economic Growth has a breakeven position at month 9. A favourable variance of £80,000.

Property and Asset Management (Aiden McManus) – forecast nil variance

3.6 Property is forecasting a breakeven position at month 9, a reduction of £80,000 from month 8, following improved performance on the rental income.

2019/20

Savings

2020/21

Savings

Total

Savings

Previous

Month

£'000 £'000 £'000 £'000

Total Proposals in Delivery 6,248 2,434 8,682 8,682

Closed Savings (Delivered) 3,152 - 3,152 3,000

Green 1,312 450 1,762 1,431

Amber 733 1,080 1,813 2,102

Red 1,051 904 1,955 2,149

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Regeneration Planning and Delivery Services (Ian Rae) – forecast nil variance

3.7 At month 9, Regeneration Planning and Delivery is forecasting to breakeven. Previously identified budget pressures are mitigated within the service through management actions taken during the year.

3.8 Planning fee income projections to the end of the year are on target in the Planning Strategy and Development service. The current forecast in Development Management is to achieve an income target of £1.9 million based on the service knowledge of pre-application and planning fee income in the pipeline. At month 9, actual income of £1.1 million was secured from planning fees, £379,000 from pre-applications and PPAs. In addition, one-off income of £165,000 was secured from the Growth fund to support salaries.

3.9 In the event that additional planning fees are not achieved, the service can reduce staffing through stopping temporary staff in Development Management service This position is monitored very closely to avoid any risks to the service budget.

3.10 Trading accounts are projected to break even, any surplus/deficit will be transferred to the trading account.

FAMILIES – Heather Flinders

Families has a net £7.293 million pressure forecast at month 9, a net increase of £2.382 million since month 8. Management actions from the use of grants and contingency are now reported within the gross forecast. The remaining pressure is being addressed within the directorate to reduce the pressure as much as possible.

Summary position for Families

Month 9 – Net Forecast C&S W&I TOTAL

£’000 £’000 £’000

Adults 2,635 1,604 4,239

Children’s 635 31 666

Communities 1,838

Education 250

Strategic Director 300

Sub Total 3,270 1,635 7,293

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Care and Support / Wellbeing and Independence (Adults – Daniel Phelps and Darren McAughtrie) – forecast £4.239 million pressure.

3.11 Adult Social Care is forecasting a £4.239 million adverse variance as at Month 9 an increase of £2.217 million from the previous month. The movement is a combination of net increase in placements, packages and equipment volume and costs, withdrawal of some external health funding totalling (£955,000) and a revision to the assumptions on savings delivery (£72,000) and deliverable, mitigating management actions for this year (£1.190 million). Across the Families model the variance can be broken down as follows:

Adults Social Care – Month 9 Gross

Year End

Forecast

Mitigations Net Year

End

Forecast

£’000 £’000 £’000

Care & Support 3,514 (879) 2,635

Wellbeing and Independence 1,604 0 1,604

Sub Total

Care & Support

5,118 (879) 4,239

3.12 Risks remain from the increase in demand observed from the start of the financial year and changes in costs. The service continues to investigate and monitor the movements in placements to identify any patterns or trends. There also continues to be pressure on staffing costs from agency staff and one-off transitional costs of re-structures. The mitigation shown in the table above assumes:

Part delivery of the remaining 2019/20 savings of £0.279 million

Management of demand £0.600 million – continuing review

3.13 The service is actively exploring all opportunities to mitigate their pressures through management actions, but delivery of all mitigations remains a risk and this is reflected in the revised deliverable actions for the rest of the financial year, resulting in a £1.190 million adverse pressure on the net forecast. Corporate solutions are to be identified to deal with the increased pressure arising from this adjustment to ensure an overall balanced budget by year-end. Further savings of £72,000 have been evidenced and delivered in Month 9.

3.14 The graph shows all external placements, service user numbers and forecasts including a snapshot at the end of 2018/19.

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Children’s Care & Support (Amana Gordon) - £0.635 million pressure

3.15 Children’s Social Care is reporting a pressure of £0.635 million (a £125,000 increase on month 8 forecast).

3.16 The overspend on placements increased during the month by £323,000 of which £221,000 relates to residential placements. There were three new Residential placements, one direct from home, one from Fostering and one Parent and Child Assessment home. Also, one young person stepped down from a Residential placement to a Fostering home.

3.17 However, by applying £435,000 other grant income now confirmed, the overall placements forecast improved by £112,000. Overall numbers of placements remained stable in the month, but average weekly costs continued their upward trend.

3.18 Expenditure on Unaccompanied Asylum seekers increased in the month by £106,000 relating to a further three young people being accommodated during the month.

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3.19 It is anticipated in this forecast that the overspend on Remand placements of £189,000 will be mitigated from the Youth Justice Reserve. The Corporate Contingency of £1 million approved in Month 3 has now been applied and reduces the overall overspend by £1 million.

Other Mitigations

3.20 As part of the Leyton Green Partnership delivery the new Residential children’s home is due to open in January 2020 and this will provide three additional placements in borough and the North East London Eight Borough Residential partnership is expected to provide a further five placements for Waltham Forest children. The Care Plans of our current cohort of children in residential settings are currently being reviewed to identify any that would benefit from moving to these new settings.

Children’s Wellbeing & Independence (Daniel Phelps) forecast £31,000 pressure

3.21 The Early Help Division are reporting a £31,000 shortfall which is £106,000 decrease on Month 8. This principally relates to a detailed review of the staffing forecasts in the Youth Offending Service and Early Help.

3.22 The forecast includes mitigations of the £60,000 shortfall in fees and charges relating to unavailability of rentable space at the Queens Road Centre due to occupancy by Leyton Children and Family Centre. It has been agreed that this will be funded corporately.

Communities (David Kilgallon and Joe McDonnell) - forecast £1.838 million pressure

Special Educational Needs and Disability Service (David Kilgallon) – forecast £1.838m pressure

3.23 Special Educational Needs and Disability Service (previously Disability Enablement Service or DES): forecast £1.838 million net adverse variance

3.24 There has been an improvement in the forecasts of £193,000. This is due to a reduction in placements costs and domiciliary care packages

Public Health (Joe McDonnell) – forecast nil variance

3.25 Public Health (ring-fenced) division continue to forecast a break even position as at month 9. The grant for 2019/20 is £15.511 million. Any changes to the forecast that results in an under or over spend will be transferred to the ringfenced Public Health reserve.

3.26 The non-ringfenced element of the Public Health division includes the Strategic Boards function and CAMHS funding, as at Month 9 this area continues to forecast to budget. However, there is an ongoing pressure in Strategic Boards relating to an income from external partners shortfall (around £60,000). This pressure is being managed within the service.

Learning – (David Kilgallon) - forecast nil variance

3.27 There continues to be a pressure of £60,000 at Snowberry Nursery from underachievement of fees from parents and £24,000 in Trade Union Facility Time from a shortfall in school and academy contributions. The mitigating

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action is that that these two areas will be offset by underspends in School Improvement services.

Traded Services - (David Kilgallon)

3.28 Traded Services are projected to breakeven excluding a further £127,000 as a result of the temporary closure of Suntrap while the site is being improved and £40,000 from the cost of the two extra days annual leave. It is assumed that these risks will be contained by management actions.

Education Services - £250,000 pressure

3.29 There is projected pressure of £250,000 on the Education Services Grant (ESG) exit strategy for 2019/20 comprising a reduction in the DSG Central Schools Services Block which funds the retained duties of the local authority; a reduction in the number of maintained schools, reducing the contributions for services to maintained schools; and a reduction in the number of schools and academies contributing towards services formerly funded by the ESG.

CORPORATE DEVELOPMENT – Rhona Cadenhead – forecast £73,000 pressure

3.29 Corporate Development’s overspend has reduced to £73,000. Officers will continue to take action to ensure that the directorate spends in line with budget.

RESIDENT SERVICES – Michele Moloney – forecast £135,000 pressure

Resident Services has a £135,000 forecast at month 9. All opportunities are being explored within the directorate to achieve a breakeven position.

3.30 The Housing Revenue Account (HRA) is forecast to breakeven. This is detailed further in section 3.44 to 3.48.

Highways and Traffic Management – Vala Valavan – forecast £526,000 favourable variance

3.31 Highways and Traffic Management is forecasting a favourable variance of £526,000.

3.32 The service has updated its month 9 to a positive £526,000. Income trends continue to look positive and new traffic control methods continue to be deployed. Income levels will be monitored over the winter months and management actions taken, as required.

Neighbourhood Services - Jarlath Griffin – forecast £370,000 pressure

3.33 Neighbourhood Services is forecasting a pressure of £370,000. There is a risk of a pressure due to the food waste trial £106,000 and a shortfall in income collection. Management have a plan in place to mitigate action.

3.34 Sports and Leisure anticipate a breakeven position although there are risks on income generation which the service is reviewing.

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Customer Services and Business Support – Louise Duffield – Forecast breakeven

3.35 Customer Services and Business Support anticipate a breakeven position.

3.36 Facilities Management is currently undergoing a transformation review which has led to a risk of an overspend as additional project staff are employed during that transition to ensure best value across the budget after the current contract comes to an end. There could potentially be a pressure of c£100k from one-off project costs and winding down of the current contract. This may be mitigated by year-end as the transformation review identifies continuing efficiencies from the FM contract.

Commercial Services – John Hubbard – Forecast £35,000 favourable variance

3.37 Commercial Services is forecasting a favourable variance of £35,000.

3.38 Enterprise Council has generated a small surplus by developing commercial opportunities such as catering and bars.

Housing General Fund (Darren Welsh) – forecast £326,000 pressure

3.39 The Housing General Fund (HGF) is projecting an overspend position of £326,000 in 2019/20 which is an improved position of £32,000 to that reported in month 8. The inherent pressure is mainly due to reduction of Flexible Homelessness Grant by £1m, hence causing the swing from 2018/19 reported outturn of £500,000 underspend.

3.40 The homelessness budget remains the most challenging area in the HGF, where demand and increasing cost of accommodation continues to put pressure on the services. The number of acceptances were lower in 2018/19 (354 in 2018/19, 570 in 2017/18) which allowed overall homelessness cases to stabilise (1,987 at December-end 2019 compared to 2,256 in March 2018), the first time that numbers are below 2,000. However, this trend is still dependent on the use of incentive schemes to discharge duty through More Homes Waltham Forest, and Local Space etc. Therefore, any delays in the acquisition schemes can adversely impact the projections going forward.

3.41 The ‘true cost’ of placements (being the difference between payments to landlords and the housing benefit caps) remains a budget risk and has increased to over £65 per week, having started the previous year at approximately £52. The increase is due to market influences on the rental sector and is forecast to reach £68 by the end of the financial year; this will likely impact base budget costs by approximately £400,000 in 2019/20 and may require central contingency support if not mitigated within the directorate in the first instance. The net unit cost pressure is highlighted by the graph as below:

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2019/20 Estimate Homelessness numbers and unit loss per placement

3.42 The Homelessness Reduction Act came into force from April 2018. Whilst this has coincided with reduction of main duty acceptances, overall foot fall has not reduced, and the cost of prevention is continuing to increase. In addition, the service has been required to increase its staffing structure to provide for the new duties costing in the region of £500,000. Funding has been partly provided through government grant, and the MHCLG have confirmed funding for next financial year.

3.43 This service area is very closely scrutinised due to its volatility and large budget impact. The service has mitigated some pressure by sourcing more affordable accommodation, as well as through the use of council owned stock, which may not be available in the medium to long term. Therefore, further extensions to the acquisition schemes to address the budget gap has been approved by Cabinet in October 2019.

Housing HRA (Darren Welsh) – forecast breakeven

3.44 The Housing Revenue Account (HRA) is expected to break even against the planned budget, which is an improvement of £90,000 reported in period 8.

3.45 Similar to previous year, the HRA continues to benefit from the use of hostels and regeneration properties at Marlow and Montague Road for Temporary Accommodation. This provides increased rental income to the HRA. Rent collection rate achieved its target at 98.45% (97.94% in 2017/18) last year and is in line with target for first part of the year (98.74% versus profiled target of 97.97%).

3.46 Universal Credit was introduced during the previous year and there are approximately 1,404 cases as at December-end 2019. Whilst arrears for such cases are higher than average, the overall arrears have remained within target (2.70% against 2.9%).

3.47 Other significant areas of spend include the repairs and maintenance budget, where Morgan Sindall have been procured to provide the responsive maintenance and building service from April 2019 onwards. The new arrangements are based on price per property models and should provide more certainty of costs, although there are some pre-contract works and TUPE bonuses that need to be funded. There also remains a material cost dispute

£61.00£62.00£63.00£64.00£65.00£66.00£67.00£68.00£69.00

0

500

1,000

1,500

2,000

2,500

Projected Overall TAnumbers

projected True Loss (£ perweek)

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with the previous contractor with regards to indexation and final accounts. Whilst a budget provision has been set aside for the claim, the council is incurring additional legal and consultancy costs in relation to this.

3.48 There also remain further risks that may impact the HRA budget, which include Water Rate Commission and the increased landlord duties as result of the recommendations from Grenfell fire Hackitt Review. Whilst these matters are being progressed, some provisions have been maintained within the HRA Medium Term Financial Strategy (MTFS).

FINANCE AND GOVERNANCE – John Turnbull – forecast nil variance

3.49 Finance & Governance is forecasting a breakeven position as at month 9, no change from previous month.

3.50 However, there is a risk within the Coroners service, where an inquest is currently ongoing. The Council has requested financial support from the Ministry of Justice. If this is unsuccessful, then the Council would need to fund their share of this cost.

Corporate Expenditure, Non-Service items and Contingency

3.51 This heading includes interest costs, capital charges and other costs not directly attributable to services such as members’ allowances and is projected to spend to budget. Contingency is forecast to be fully utilised. If there is any call on reserves for one-off items, then this must follow the financial ground rules.

3.52 The latest Treasury projections forecast an underspend of £3 million on interest income and payments, resulting from slippage in the capital programme and capital financing contributions from services on four schemes funded from other portfolios. £1 million of this underspend has already been earmarked towards the pressures within Families.

3.53 Any remaining budget pressures may be resolved from corporate resources to achieve a balanced budget at year-end. This will only be used after directorate mitigating management actions have been exhausted.

Council Tax / NNDR Collection

3.54 The 2019/20 forecasts are broadly in line with 2018/19 figures and are both expected on this basis to achieve their targets of 97.7% for business rates and 96.2% for council tax collection. The tables below show the performance of both Council Tax and Business Rates collection.

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4 OPTIONS & ALTERNATIVES CONSIDERED

4.1 Much of this report is concerned with provision of information, for which alternative options is not a relevant consideration.

5. SUSTAINABLE COMMUNITY STRATEGY PRIORITIES (AND OTHER NATIONAL OR LOCAL POLICIES OR STRATEGIES)

5.1 The entire content of this report contributes to the corporate priority to Achieve Excellence and Ensure Value for Money.

6. CONSULTATION

6.1 Executive Directors and Portfolio Holders have been consulted.

7. IMPLICATIONS

7.1 Finance, Value for Money and Risk

7.1.1 The whole report is of a financial nature. The key purpose of the report is to monitor the Council’s overall financial performance against the assumptions

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contained in the MTFS. To maintain the robustness of the Council’s finances and budget plans, effective budgetary control by services will continue to be essential and will help the Council to maximise the resources available to meet its priorities.

7.1.2 The DSG deficit is projected to be £1.97 million as at 31 March 2020, comprising a cumulative High Needs Block deficit of £5.24 million, partially offset by surplus balances on the Early Years Block of £2.22 million and the Schools Block Growth Fund of £1.04 million. If High Needs Block expenditure does not exceed the High Needs Block allocation in 2020-21, the deficit is projected to rise to £2.96 million by 31 March 2021 as the Early Years and Schools Block reserves are reduced to meet commitments. If High Needs expenditure continues to exceed the High Needs Block allocation, the projected deficit will rise further.

7.1.3 The new regulations and grant conditions being introduced by the government effectively preclude the General Fund supporting the Dedicated School Budget other than issues such as PFI and small items, which could include some SEND funding but not of the magnitude of pressure being experienced, and that permission from the Secretary of State would need to be sought.

Any brought forward balance from the end of the current year, 2019-20, will need to be recovered over time and a similar approach applies to financial years going forward7.2 Legal

7.2.1 There are no direct legal implications.

7.3 Equalities and Diversity

7.3.1 An initial equality analysis was undertaken, and it determined there was no negative impact arising from the information or changes proposed in this report on the advancement of equality. The support of No Recourse to Public Funds clients are areas that continue to contribute to the Council’s commitment to protecting the most vulnerable and help meet the equality duty.

7.4 Sustainability (including climate change, health, crime and disorder)

7.4.1 A stable financial position means that the Council is more able to fund urgent health priorities as they arise. Services to older people experienced pressures and needed careful management.

7.5 Council Infrastructure (e.g. Human Resources, Accommodation or IT issues)

7.5.1 There are no direct council infrastructure implications.

7.6 Brexit

7.6.1 As part of the budget monitoring process, the risks will be monitored by services and any necessary action put in place in line with the Council’s Ground Rules for Financial Control.

BACKGROUND INFORMATION (as defined by Local Government (Access to Information) Act 1985)

None